Costing a 40-Set School Order Before Quoting
Jasleen runs a two-machine tailoring unit from a room in her house in Patiala. A school offers her an order of 40 salwar-kameez sets. Her figures: fabric 2.5 m per set at ₹180 per metre (112 cm width), an extra 8% fabric for matching the print and wastage, thread ₹15 per set, hooks and buttons ₹10 per set, stitching by a hired tailor ₹220 per set, overlocking ₹20 per set, rent and electricity ₹25 per set, and ₹600 for one trip to deliver all 40 sets. The fabric shop will give a 5% discount if she buys all the cloth at once. She plans to quote ₹850 per set. The school will pay 30 days after delivery; she must pay the tailor and the fabric shop immediately.
1. Work out the full cost per set and the total profit at ₹850, both without and with the 5% fabric discount.
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Fabric per set: 2.5 m × 1.08 = 2.70 m.
Without discount: 2.70 × ₹180 = ₹486. Other costs: thread 15 + hooks/buttons 10 + tailor 220 + overlocking 20 + rent/electricity 25 = ₹290. Transport = ₹600 ÷ 40 = ₹15. Cost per set = 486 + 290 + 15 = ₹791. Profit at ₹850 = ₹59 per set, total ₹2,360 on 40 sets - a margin of about 7% on the quote.
With the 5% fabric discount: rate becomes ₹171/m, so 2.70 × 171 = ₹461.70. Cost per set = 461.70 + 290 + 15 = ₹766.70. Profit = ₹83.30 per set, total ₹3,332 - about 10% on the quote.
The discount alone is worth ₹24.30 per set, ₹972 on the order. That is more than a third of her planned profit, which shows how thin a ₹850 quote is: one mistake in the fabric estimate wipes out the margin.
2. Name two costs Jasleen has left out, and explain the cash-flow risk of the 30-day payment term.
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Costs left out:
- Her own labour for cutting, matching prints, finishing, pressing and checking 40 sets. If that is 10–12 hours of cutting and finishing, the order is not profitable at ₹59 a set once her time is priced.
- Rework and rejects. In a 40-set run, 2–3 sets will need a collar reset, a hem corrected or a size redone. She has also not costed machine depreciation, needles, oil, or fabric that arrives short-measured or with a defect in the middle of a piece.
Cash-flow risk: she must pay the fabric shop and the tailor immediately - roughly 40 × ₹766.70 ≈ ₹30,670 goes out in the first week - while ₹34,000 at ₹850 comes in a month later. She is effectively lending the school a month's working capital with no interest. If the school pays late, or deducts for two rejected sets, she may have to borrow at a rate that exceeds her 7% margin. A single large order can leave a small unit unable to pay its tailor the following week.
3. Recommend a quote and give two concrete ways to protect the margin, with figures where possible.
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Quote ₹975–1,000 per set, not ₹850. At ₹975 with the discount, the margin is 975 − 766.70 = ₹208 per set, about 21%, which leaves room for two reworked sets and still shows a profit. Even ₹950 gives ₹183 per set. If the school insists on ₹850, she should take the order only with an advance.
Protect the margin by:
- Cutting wastage from 8% to 4–5% through layout. The fabric is 112 cm wide; by nesting the salwar legs and the kameez panels carefully and matching the print only at the centre front, 2.5 m plus 4% = 2.60 m is achievable, saving ₹17–18 per set (about ₹700 on the order).
- Asking for 50% advance and buying all the fabric the same day to lock the 5% discount, which also removes the borrowing risk. A written order specifying the sizes, the delivery date and a rework allowance protects her better than a low price.
She should also negotiate the tailor's rate for a 40-set run - a bulk rate of ₹200 instead of ₹220 saves ₹800 - and inspect the fabric roll for short metreage and defects before it is cut, since defects found after cutting are her loss, not the shop's.